CEO pay keeps soaring, defying Congress and local taxes: See which executives top the list in Oregon

Pat Gelsinger in a suit and tie on stage

Intel valued CEO Pat Gelsinger's pay at $179 million last year -- but much of that value evaporates unless the company's stock rebounds. Beth Nakamura/The Oregonian

The cost of big paydays for corporate CEOs keeps rising, but so do those eye-popping salaries.

A new study of CEO pay finds that changes in the federal tax code aimed at constraining executive pay has done nothing to reduce what companies pay their leaders.

“Taxes are just not a big enough stick to change the structure or the magnitude of executive compensation,” said Bridget Stomberg, an accounting professor at Indiana University. Stomberg and two colleagues studied what happened to CEO pay after a 2017 change to federal law reduced companies ability to deduct executive compensation from their taxable income.

The result?

“Even three full years after the law took effect, we didn’t see any evidence of a reduction in CEO pay,” Stomberg said in a news release that accompanied the study’s publication last month.

The authors noted two cities – Portland and San Francisco – have their own taxes tied to big disparities between CEO and worker pay, and eight states are considering similar taxes.

Portland’s measure, approved in 2016, levies a small tax on businesses operating in the city that pay their CEOs more than 100 times what they pay their median worker.

Former Portland Commissioner Steve Novick, who championed the tax, said at the time he had no expectation it would actually constrain CEO pay. Instead, he described it as “a tax on inequality itself.”

Portland collected $5.2 million in revenue from the tax in 2019, up from $3.15 million in 2017. The city has received another $4.7 million from the tax for 2020, and collections from that year are continuing. (2021 figures aren’t available yet.)

Outsize pay packages remained abundant in The Oregonian/OregonLive’s annual survey of executive compensation among public companies active in the region. Intel CEO Pat Gelsinger topped the list with a pay package valued at $179 million. (See the full list at the bottom of this article.)

Intel reported Gelsinger’s pay was more than 1,700 times higher than the $104,000 the company paid its median worker. That is, by far, the greatest disparity in The Oregonian/OregonLive’s latest survey.

Intel acknowledged the extraordinary compensation triggered hard questions from its investors – who denounced Gelsinger’s incentives in a nonbinding vote last spring.

The federal government requires most public companies to compare their CEO compensation to worker wages every year. In Gelsinger’s case, though, Intel argues that his pay isn’t all that it seems.

Intel reported an unusual, “alternative pay ratio” this year – stripping out one-time payouts associated with Gelsinger’s hiring. But that measure, he earned just $29 million – only 276 times greater than the median Intel worker’s wage.

In any event, the actual value of Gelsinger’s payday may be considerably below the $179 million Intel reported.

Nearly all his compensation comes in the form of stock grants – and many of the grants evaporate unless Intel’s share price soars. Unfortunately for Intel, and for Gelsinger, the opposite has happened.

Intel shares are at their lowest price in years, trading around $35. Unless Gelsinger engineers a turnaround, much of his stock-based compensation will be worthless.

Dutch Bros’ CEO Joth Ricci recorded the second-biggest payout last year among regional companies, with $62.4 million in compensation. That consisted mostly of one-time stock grants associated with the company’s initial public offering.

Some newly public companies don’t have to report median worker wages, and Dutch Bros did not. So it’s not possible to compare Ricci’s payout to what workers’ earned. In fact, nearly a third of the companies in this year’s survey didn’t report workers’ wages.

Such comparisons are possible for Kroger – Fred Meyer’s corporate parent – and for Nike, the largest company headquartered in Oregon.

Kroger CEO Rodney McMullen reported $22.4 million in pay last year, more than 900 times the median employee wage of $25,000. McMullen told CNBC last year that his company had 20,000 job openings and complained that “One of the biggest constraints we have right now is finding talented people.”

Nike says it paid CEO John Donahoe $28.8 million, 770 times the median worker pay of $37,400. Kroger CEO Rodney McMullen reported $18.2 million in pay last year, 670 times the median employee wage of $26,800

Two Oregon CEOs stood out last year not because their pay appeared especially high, but because it seems unusually low.

Eugene electric vehicle manufacturer Arcimoto valued CEO Mark Frohnmayer’s compensation at $295,000 (Arcimoto removed Frohnmayer as CEO this week), while Beaverton technology company Digimarc said CEO Riley McCormack earned $250,000. That’s less than double the median wage of a Digimarc employee.

While those CEOs received healthy salaries, to be sure, they’re far below what other CEOs received.

Again, though, their salaries aren’t the whole story. Both Frohnmayer and McCormack are their companies’ largest shareholders, each with about 20% of the stock. So their payouts figure to be many times larger than their salaries – provided their companies deliver financially.

This is Oregon Insight, The Oregonian’s weekly look at the numbers behind the state’s economy. View past installments here.

Correction: Kroger CEO Rodney McMullen reported $18.2 million in pay for 2021 and the median employee pay was $26,700. This article originally reported 2020 pay figures, when McMullen received $4 million more and median workers received about $2,000 less.

-- Mike Rogoway | mrogoway@oregonian.com | Twitter: @rogoway | 503-294-7699

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